Beijing remained the top locale for Chinese startups in 2012, but second-tier cities are on the rise

China’s capital of Beijing held on to its position as the top city for startups in Greater China, but entrepreneurs are increasingly choosing to start their companies in second-tier cities, according to a year-end report from 17Startup.

The site, which maintains a database of startups in mainland China, Hong Kong and Taiwan, found that 42% of companies were based in Beijing, down from 49.8% in 2011. Shanghai remaind second, with 18% of companies. Guangdong placed third with 14%, up from 12% in 2011.

Zhejiang, Sichuan, Taiwan, Jiangsu, Fujian, Hong Kong and Hubei rounded out the top 10. Together they accounted for 20% of startups, an improvement from 13% in 2011.

Given that Beijing still houses twice as many startups as second-place Shanghai, it’s not likely to give up its lead anytime soon, but the data does point to an industry trend of greater geographic diversity in China. Tech in Asia reported on the shift toward second-tier cities last August, and it appears to have continued in the latter part of 2012.

A number of factors will have contributed to the change. For one, rising costs in Beijing and other top cities may have pushed some companies to other regions. That was the case for TribePlay, the developer behind the Dr. Panda educational game series. Founder Thijs Bosma told TNW that he decided to start the company in Chengdu, Sichuan because funding would stretch further there, and the city had a solid pool of 2D and 3D artists that he could hire.

Improvements to Internet infrastructure have also made the possibility of tech startups in other areas more viable. Though the government focused first on improving connections in Beijing and Shanghai, it is turning its attention to bringing broadband to less-developed cities and rural areas.

It’s certainly natural for China’s leadership to invest first at its doorstep. Living here in Beijing, there’s an energy to the startup culture here that helps create a sense of an entrepreneurial community. Still, it’s great to see startups being founded in other areas throughout China too. With programs like Chinaccelerator in Dalian, Haxlr8r in Shenzhen and AcceleratorHK in Hong Kong, China’s rising tide is helping startups embark from an increasing number of ports.